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PROJECT INFORMATION DOCUMENT (PID) APPRAISAL STAGE Report No.: AB6831 Jakarta Urgent Flood Mitigation Project Project Name Public Disclosure Authorized Region EAST ASIA AND PACIFIC Sector Flood Protection (100%) Project ID P111034 Borrower(s) REPUBLIC OF INDONESIA Implementing Agency 1. Ministry of Public Works (MoPW) Jl. Pattimura 20, Kebayoran Baru, Jakarta 12110, Indonesia Tel: + 62-21-726 2366; Fax: + 62-21-726 1292 2. DKI Jakarta Provincial Government Balaikota Jakarta, Jl. Medan Merdeka Selatan 8-9, Jakarta 10110, Indonesia Tel: + 62-21-382 2305; Fax: + 62-21-381 2854 Environment Category [X] A [ ] B [ ] C [ ] FI [ ] TBD (to be determined) Public Disclosure Authorized Date PID Prepared October 13, 2011 Date of Appraisal September 8, 2011 Authorization Date of Board Approval January 17, 2012 Country and Sector Background Country Context 1. Macroeconomic Context . Since the political, environmental and economic shocks that shook the nation during the Asian Financial Crisis of 1997/8, political and institutional reforms Public Disclosure Authorized over the last decade have led to a stable and vibrant democracy in Indonesia. Political power is now broadly shared among the several branches of government, and widely decentralized to the levels of provincial and local governments under the 2001 regional autonomy laws. Indonesia’s economy has also performed well, averaging five to six percent annually over the past decade despite the slowing world economy. Projections expect 6.4% growth in 2011, increasing to around 6.7% in 2012. 2. Low infrastructure investments and poor maintenance. A collapse in investments sparked by the 1997/98 financial crisis has led to a long backlog in infrastructure development. Furthermore, poor maintenance of existing infrastructure continues to deteriorate the capacity for providing sufficient public services. In recent years however, infrastructure investment has begun to recover, reaching 3.95% of GDP by 2008. This is not yet at pre-crisis levels and is inadequate to reverse the investment backlog and to meet the growing demand from existing Public Disclosure Authorized infrastructure users, let alone satisfy the large population who lack access to basic services. Investments planned and underway also tend to prioritize new infrastructure development while operation and maintenance (O&M) is still neglected. 3. Reversing lagging infrastructure development . Inadequate infrastructure is a significant constraint to Indonesia’s growth potential. The Government of Indonesia (GoI) has adopted an ambitious plan to rebuild and develop infrastructure. In the period from 2010-14, budget expenditure is expected to increase by more than thirty percent compared with the previous five year period. It is essential for Indonesia’s infrastructure institutions to translate these resources into better development outcomes. However, they face significant constraints and challenges. The coordination amongst, and clarity of roles and responsibilities between, the various levels of government remain inadequate. The capacity of provincial and local governments charged with the responsibility of basic service delivery is still weak. GoI has not yet provided an appropriate system of incentives, nor empowered local administrations with the authority and financial resources needed to improve and maintain public infrastructure. Effective procedures and regulations for financial transfers from central to provincial and local governments have not been fully established. 4. The need for improved social policies and better environmental oversight . Land acquisition for public purposes is a frequent source of delay in infrastructure projects. Indonesia’s standards of compensation for land acquisition, especially involuntary resettlement of informal communities does not yet meet international standards. In DKI (Daerah Khusus Ibukota Jakarta ), eviction has been a long-standing policy and practice for repossessing government land mainly for the development of projects in the public interest. The implementation of evictions has evolved over time with a positive trend towards more equitable approaches. There have been recent efforts to improve and streamline social safeguards measures, including the effort to enact a law on Land Acquisition for Public Interest Infrastructure Development and the issuance of the Guidelines for Providing Compensation to Users of State Land by the Governor of DKI Jakarta. The efforts to improve public sector governance, land acquisition, and environmental management which have in the past mired effective provision of infrastructure services need to be redoubled. On environmental oversight, while the policy framework for oversight appears sufficient, the implementation of environmental management and monitoring plans requires improvement. Sectoral and Institutional Context 5. The primacy of Jakarta . Jakarta is the preeminent urban center of Indonesia. It is the main commercial hub of Indonesia and contributes about 25% of Indonesia’s non-oil GDP (the non-oil GDP is estimated at about US$571 billion in current terms in 2009). As the economic and political center of Indonesia, regional urbanization has also contributed to making Jakarta one of the largest metropolitan areas in the world. The Special Capital District of Jakarta (DKI) covers an area of approximately 650 km2 with a population of about 9 million. The population of Greater Jakarta (covering about 7,300 km2) stood at 23.7 million in 2005. Population growth rates are far above the national average and are projected to exceed 35 million people by 2020. Up to 250,000 rural-urban migrants are estimated to move to Jakarta every year, contributing to the increase in informal settlements where people live without the benefit of public services (e.g., transportation, water supply, sanitation and waste management). Due to rapid growth and inadequate development of public services, the city has become known for a host of problems the most severe of which are manifested in disastrous perennial flooding. Any effort to improve and increase the access to basic public services and adequate flood mitigation for the population of Indonesia needs to include Jakarta as a focus area. 6. Flood management infrastructure in Jakarta . Greater Jakarta is surrounded by several dormant volcanoes whose slopes form the upstream catchment areas of the 13 major rivers that flow through DKI to the Java Sea. The rainy season begins in late November and ends in early April. DKI sits in the lowest lying areas of the basin. Forty percent of DKI lies below sea level, including most of North Jakarta, which is being severely threatened by acute land subsidence. The basic principle of flood management in Jakarta is to divert peak flows from upstream areas around the core of the city, directing flows to the East and West of Jakarta via two major flood canals emptying into Jakarta Bay. Within the city, the macro drainage system of DKI consists of 13 rivers and a large number of drainage channels. The macro drainage system can be divided into several subsystems that are separated by floodgates. In low-lying areas there are polders, which are protective systems that utilize retention reservoirs at the lowest point and regulate excess water levels by pumping out of the system. However, the originally planned flood management system remains incomplete and does not function as a fully integrated system. The East flood ( banjir ) canal was recently completed but is not yet fully functional. Furthermore, the east-west canals are not yet connected into an integrated diversion system, which would allow better stormwater management and control. Poor condition of the system, severe under- implementation of operations and maintenance (O&M), and inadequate local drainage management result in rapidly occurring inundations during rainfall conditions. Interventions are often introduced at the local level utilizing private funds, which result in floods being transferred to and experienced most acutely by the poorest populations. 7. Incidences of floods in Jakarta . Flood incidences are perennial occurrences and have been increasing in severity during the past decade. Floods in January 1996, February 2002, and February 2007 were especially devastating. The 2007 event inundated 235 km2 (about 36%) of the city, by up to seven meters in some areas. The 2007 floods affected more than 2.6 million people and forced 340,000 people to flee their homes. Over 70 people died and outbreaks of disease affected over 200,000 people. The estimated financial and economic losses from the 2007 flood amounted to US$900 million. Inundations continue to occur under any sustained rainfall conditions. In 2008 a flood event closed the airport toll road, cancelling over 1,000 flights and causing serious disruptions for the city. Floods in 2009 also occurred at high intensity and have continued into 2010, which became the year without a dry season due to the La Niña effect. 8. Causes of floods in Jakarta . The overall urbanization trends are central to the causes of Jakarta flooding. This has led to the deterioration of several critical factors. The encroachment and/or development of critical catchment areas (and the lack of systematic catchment degradation mitigation measures) have resulted in both increased rainwater runoff and lack of natural stormwater retention areas both within the city and in upstream areas of the catchment. Increased generation and inadequate management of solid waste have contributed to waste choked